The Treasury is racing to find tax reforms to boost UK growth amid fears that at least £10bn could be wiped off the government’s already-strained fiscal plan.
Chancellor Rachel Reeves has ordered officials to identify tax changes that would improve forecasts from the Office for Budget Responsibility, which are crucial to sticking to her key fiscal rule.
The watchdog’s productivity forecasts have long been seen as too optimistic. One Labour official said a downgrade was “a matter of when, not if”, prompting Reeves to search for growth-promoting measures that could mitigate the damage.
Some forecasters are predicting that the prospect of a productivity downgrade, coupled with weaker growth driven by the trade war, could help expose a fiscal hole exceeding £20bn in the October Budget.
Richard Hughes, the chair of the OBR, noted last month that a mere 0.1 percentage point reduction in the productivity growth forecast over five years would wipe out Reeves’ £9.9bn of headroom against her key fiscal rule, which commits her to matching day-to-day spending with tax revenues by 2029-30.
“The chancellor has issued an edict to identify tax reforms,” said one ally of Reeves, pointing to a three-pronged approach that also includes deregulation and new legislation to cut red tape, especially on planning.
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Why not increase income tax and reduce corporate tax? Companies can compensate higher brackets earners by offering non-monetary gifts with their new financial freedom
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The Treasury is racing to find tax reforms to boost UK growth amid fears that at least £10bn could be wiped off the government’s already-strained fiscal plan.
Chancellor Rachel Reeves has ordered officials to identify tax changes that would improve forecasts from the Office for Budget Responsibility, which are crucial to sticking to her key fiscal rule.
The watchdog’s productivity forecasts have long been seen as too optimistic. One Labour official said a downgrade was “a matter of when, not if”, prompting Reeves to search for growth-promoting measures that could mitigate the damage.
Some forecasters are predicting that the prospect of a productivity downgrade, coupled with weaker growth driven by the trade war, could help expose a fiscal hole exceeding £20bn in the October Budget.
Richard Hughes, the chair of the OBR, noted last month that a mere 0.1 percentage point reduction in the productivity growth forecast over five years would wipe out Reeves’ £9.9bn of headroom against her key fiscal rule, which commits her to matching day-to-day spending with tax revenues by 2029-30.
“The chancellor has issued an edict to identify tax reforms,” said one ally of Reeves, pointing to a three-pronged approach that also includes deregulation and new legislation to cut red tape, especially on planning.
Why not increase income tax and reduce corporate tax? Companies can compensate higher brackets earners by offering non-monetary gifts with their new financial freedom